Identify a primary use of financial ratios in business management.

Financial ratios are essential tools in business management primarily used to assess a company's performance and financial health. By analyzing various ratios, management can gain insights into different aspects of the business, such as profitability, liquidity, solvency, and efficiency. These metrics allow decision-makers to evaluate how well the company is doing financially compared to its historical performance, industry benchmarks, or competitors.

For instance, profitability ratios like net profit margin indicate how much profit a company makes for each dollar of revenue, while liquidity ratios such as the current ratio measure a company's ability to cover its short-term obligations. By regularly evaluating these ratios, management can identify strengths and weaknesses within the organization, leading to informed strategy adjustments, resource allocation, and financial planning aimed at growth and sustainability.